“The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government’s plans.

As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department’s special master for compensation, also intends to demand a host of corporate governance changes at those firms.”

The “general Welfare” clause keeps coming back to haunt us.

H/t2 Mario Rizzo

It found that about half the customers noticed the calorie counts, which were prominently posted on menu boards. About 28 percent of those who noticed them said the information had influenced their ordering, and 9 out of 10 of those said they had made healthier choices as a result.

But when the researchers checked receipts afterward, they found that people had, in fact, ordered slightly more calories than the typical customer had before the labeling law went into effect, in July 2008.

These are fascinating results. People are generally conscious of the change, think they are responding in a positive direction, but actually doing the opposite. I’d be interested to see how people are making more unhealthier choices.

I’d be willing to bet that they are switching to foods that they perceive as being healthier, but actually contain more calories. This could be a result from an information asymmetry. The calorie counts are usually the ‘bare minimum’ of what fast food joints offer, without the fixings, sides and drinks. Perhaps people are switching to lower calorie foods, but getting more of the high caloric ‘frills.’

If we don’t assume rationality, another explanation is that people are unobservant and ignorant about what they’re putting in their mouths.

This also calls into doubt the ability for regulation to achieve the desired affects and highlights the important of price signals, especially because we’re in a recession. People are looking for the cheapest food these days and so will respond to price signals much more strongly than health signals.

HT2 Jeffrey Miron

http://jeffreymiron.blogspot.com/2009/10/calorie-postings-and-food-habits.html

The US government has relaxed its control over how the internet is run.

It has signed a four-page “affirmation of commitments” with the net regulator Icann, giving the body autonomy for the first time.

Previous agreements gave the US close oversight of Icann – drawing criticism from other countries and groups.

I’m sure we’re supposed to like that the federal government is giving up some of its control (I wonder how game theory or public choice theory explains that), but does it count if they’re just handing the reigns over more fully to a different institution?

This is just some loose speculation. I’m fairly certain that Icann has some critical function for smooth operation and, more importantly, organization, of the internet.

I’d like that add that, if this view is correct, I predict that when the banks start lending this money out, we’re going to be hit by lots of inflation.

Jeff Harding from Daily Capitalist blog is already calling Obama’s proposal of new financial regulations (which are really more like hints of a proposal) New Deal V. 2.0 (hint – in austro-capitalist land, this is a bad thing).

I’m willing to reserve judgement to see what he wants to passed and what actually gets through Congress, but I share Harding’s general distaste for the thing. If there’s one sure way to screw up regulations, it’s to let the economists draft it and the politicians pass it.

Because I’m reading Taleb (sorry to keep bringing this up), I can’t help thinking that new regulations will not help us deal with the “black swan” that was the financial crisis. Regulation is retrospective and is not likely to help us forsee new problems.

“Following implementation of the act, the trajectory of the economy changed materially toward moderating output decline and job loss,” the president’s Council of Economic Advisers told Congress.

It looks like somebody needs a lesson in post hoc ergo propter hoc. I’m sure their statistics are all nice and tidy, though.

The blogosphere is humming (or is it a roar?) with glee and angst in regards to Obama’s speech. Honestly, I didn’t pay much attention to it, but I did appreciate Robin Hanson’s comments last night.

So he’s going to save $500+ billion over ten years by having an independent commission “encourage best practices”?  Actually doing that would require this commission to have enormous power and be willing to use it to create many politically powerful enemies.  I see no sign whatsoever that they are actually willing to do this, nor any sign that they would actually be willing to cut medical spending if “spending cuts” somewhere were required by law.  So far this still looks like the usual empty campaign promise to pay for spending deficits by “cutting waste and abuse.”

We’ve now seen this claim a hundred times, but does anybody really believe we’ll be able to finance a public option entirely by cutting costs to medicare and then have regulatory bodies keep costs under control by reducing inefficiencies?

I mean it sounds nice, but the federal government has not, in general, demonstrated an ability to improve efficiency in other areas, so why here?

Usually I take this argument with a grain of salt – we can’t assume that the “clash for clunkers” program will tell us anything the public care program (very different infrastructure will be set up) – but there’s something to be said about the central planner problem in cases like these.

How will it be possible to cut waste and not reduce care? I don’t think this is possible, because patients will have a very different idea about what constitutes waste than bureaucrats (even doctors are involved in making decisions).

What I suspect, is that if the public option gets passed, we will realize that the studies comparing American to European health care weren’t telling us the whole story. Health indicators depend on a lot more than complete health insurance coverage. I suspect we’ll see wider coverage, but higher costs (until price controls are legislated, of course) but no significant improvements in general health statistics.

It seems like they are going to game the system with incentives to promote treatment (rather than healthy prevention; diet and exercise, etc) – things that keep people from dying, but not necessarily healthy. Unless price information is introduced, I can’t see how the system – public or private – will be improved.

That being said though, I wouldn’t necessarily say “no” to a public plan that was able to use pricing incentives to encourage consumers to make choices about health care options and introduce real competition between providers. I believe that only a market system can keep costs under control.

Well you have to give Chris Betram credit for trying to support the concept of death panels. I understand, but vehemently disagree, with his larger point: that ‘death panels’ are the necessary extension of the social engineering experiment that is universal health care (and by that I mean NHS-style, government-owned everything).

Afterall, without markets to coordinate supply and demand, costs will skyrocket unless rationing is carefully planned.

Betram quotes one Ronald Dworkin:

… we should aim to make collective, social decisions about the quantity and distribution of health care so as to match, as closely as possible, the decisions that people in the community would make for themselves…

I don’t buy this: if we’re just using the collective to make decisions for the individual, its because some institution(s) doesn’t – or finds it inconvenient to – believe that the individual can make personal decisions about their health care that produces optimal social outcomes (whatever this is perceived to be). Therefore, simply by making that argument in favor of employing technocrats to engineer decisions about health care in the community, and perhaps circumventing an individual’s choices, it’s a tacit admission that we think consumers are stupid about their health care.

Well… even if consumers aren’t stupid, the ‘deciders’ don’t think individual decisions (even if they are rational and informed) produce the best outcomes for society as a whole (see my lunch line post). This may or may not be true, but to support this type of socialized health care is to imply that central planners can produce more efficient outcomes than decentralized decisions in a free market. Which I don’t think anyone thinks is true. And there doesn’t seem to be strong empirical evidence to discriminate which option is more efficient than the other (except that our hybrid solution is the least efficient of all).

Maybe we should at least try free markets before assuming that they won’t be able to provide efficient solutions and insure everyone who wants to be? And, even if they turn out to be less efficient, perhaps we should go with this option anyway and accept some reduced efficiency to preserve more individual freedoms – if it does come down to “death panels”.

HT2 Tyler Cowen

No sooner do I ask Austrian economists when they think inflation will hit and gold prices will rise, Bob Murphy announces that gold has risen to $987 an ounce. This is way up, but not close to the calls of $2000 per ounce that I’ve been hearing on goldbug radio ads.

PS – he also links to this story about how the IRS is now taxing the ownership of physical gold at 28%. But I don’t get how this works. If I own a gold bar, will they try to tax it every year or only when I sell it (and it’s considered ‘capital gains’)?

Robert Murphy shares this piece from Larry Kudlow:

In Hayekian and Misesean terms, bad investment and spending decisions are being remedied through the free-market corrective process. And, greased by easy money, today’s market correctives may produce a much stronger V-shaped recovery than the stock-market consensus expects.

Talk about misrepresenting a position! According to Hayek and Mises, using easy money to grease the wheels is the exact opposite of market correction. This is exactly what creates monetary inflation and unsustainable bubbles. So what looks like V-shaped recovery is actually, on the recovery end, only the illusion of recovery.This easy money gets funneled into bad investments which eventually come crashing down when the market can no longer support them.

This is like saying the Yankees are going to start scoring more points by trimming all that dead weight from behind the plate – by getting rid their pitching staff. He’s got some idea of how to win a baseball game, but only pays attention when the Yankees are at bat. In other words, he’s only understanding half of Austrian Business Cycle Theory – the part where easy money creates a boom, but doesn’t see the long term, stable strategy.  He’s analyzing a complex situation but only looking as far as his nose – while trying and failing to throw some peanuts towards the ‘free market’ crowd.

Harvard economist Jeffrey Miron is blogging again. Here are two excellent posts on how badly the war in Afghanistan is going. The first is how US troops are failing to suppress opium production. The second about how the Taliban is gaining on us, in terms of its military strategy. Though somewhat more legitimate than the Iraq war, is there any doubt that our troops should not be in Afghanistan right now (this is a serious question, I’m not playing politics)?

I’m going to try a recurring thing, where I link to other blog posts and make very quick comments about them. We’ll see how weekly Friday posts work for this.

1) Robert Murphy praises Paul Krugman – a huge turn of events from a man who is usually (and often correctly) hypercritical of the Nobel Laureate. I guess Austrians and Keynesians can find some common ground – namely when they’re attacking assumptions made the Chicago school.

2) Tyler Cowen tries to get Peter Boettke to admit that the financial bailouts were a good idea. Boettke predictably refuses, stating that Cowen is misstating what it means to be a libertarian. Cowen hits back with the notion that letting banks go bankrupt instead of bailing them out would still increase the size of government – because you need the court systems to deal with all the fallout. Steve Horowitz weighs in on the Austrian Economics blog, saying that Tyler is confusing increasing the scale of government (which would be necessary to deal with increased work load associated with bankruptcy from bank failure, but would not give government new powers). Horowitz points out the the bailouts increased the scope of government – creating a the feds precedence to use new powers.  I think this last view is essentially correct. I’ve stopped thinking of Cowen as a libertarian for a while now. Stay tooned, because I’m sure this debate is not over.

3) A strange case where the Dutch government has taken legal guardianship over a 13 year old girl, who is trying to become the youngest person to sail, solo, around the world. Her parents are ok with it, but the nanny state has intervened. Possible violation of freedoms or just negligent parents (or both)?

4) My father has a new education related blog, but has yet to post. He keeps trying to get me to teach him, but I everything I tell him he forgets in a couple weeks and asks me to repeat myself. I’m not holding out much hope that his blog will be very successful, but we’ll see. He has some good ideas about providing resources to fellow educators – something he knows a lot about.

But it is a good thing?  I buy that it would be good for allowing “gay marriage” (in the way that all civil union contracts would be the same for all consenting adults regardless of gender) but why should the state not incentivize the survival of family structure?  How would alimony and child support payments be enforced?  I’m no expert in contract law (or any law for that matter) but treatment of these issues seems problematic – and by that I mean overlooked.  One of the highest rates of single parenthood is in poor black communities, and that doesn’t seem to be working out too well for them (here is just one report)  Maybe we need stronger incentives to retain familial structure, rather than less.

Here’s one more statement of Rizzo’s I find misrepresents reality a bit:

For many centuries the State was not involved in restricting the nature of “marriage.” The terms of marriage were the domain of the Church.

Rizzo seems to forget or neglect the fact that, for a long time, the church was essentially the state.  And I’m not even talking about medieval europe here.  For good or ill, religious attitudes still affect policy makers decisions in the United States.

This points to a larger question (I’m not particularly interesting in debating the plausibility of a real change occurring in the public’s conception of marriage law).  Without a doubt, the role of the Church in people’s lives, from daily rituals to law and governence is waning.  Therefore, is the growth of a allegedly religious-neutral State a natural way for the morality of the majority to express itself?

If we’re replacing religious doctrine with some agreed upon, democratic form of secular humanism (influenced but not dictated by traditional religious tennants) maybe common law that  governs marriage isn’t a bad thing.  Maybe leaving marriage terms up to the individual parties would generate chaos?

On the other hand, tryanny of the majority is something we’re supposed to want to avoid, as well as the assumption that politicians know best.

Truly, this a tricky issue with many layers.  Isn’t it better to discuss them all before defaulting to the standard (though admittedly defensible) libertarian-anarchist position?

PS – Hello World!